Yesterday Norwegian bowed to the extreme market conditions and lack of additional government financial support and filed for bankruptcy protection process in Ireland. Subsidiary Norwegian Air International Limited (NAI), and Norwegian’s wholly-owned asset company Arctic Aviation Assets DAC (AAA) and some of its subsidiaries have now entered the examinership process in Ireland, Norwegian will also enter in and get protection of the Irish Examinership process as a related party.
Norwegian said that it has chosen an Irish process because its aircraft assets are held in Ireland, adding that the company has taken this decision in the interest of its stakeholders.
Industry sources are viewing this as a positive move for the airline. The process will take time and will allow the airline space to reduce its debt burden, rightsize its fleet and secure new capital, while negotiating with creditors to find an acceptable solution to ensure the airline is not forced to enter liquidation. Norwegian expects the process to take up to five months.
Norwegian states that it will continue to operate its route network (currently limited due to the Covid situation) and trade as normal on the Oslo Stock Exchange (Oslo Børs). The company states that safeguarding as many jobs as possible, while rightsizing its asset base, is a “top priority” for the management team throughout this process.
Jacob Schram, Norwegian CEO, said: “Seeking protection to reorganise under Irish law is a decision that we have taken to secure the future of Norwegian for the benefit of our employees, customers and investors. Our aim is to find solutions with our stakeholders that will allow us to emerge as a financially stronger and secure airline.”
The process of examinership in Ireland allows financially sustainable businesses to address elements of the business which require restructuring with the aim of protecting jobs and preserving the core value of the business. This protection, through a court appointed examiner, ultimately allows a company to secure new capital and implement a legally binding scheme for the settlement of debts.
“Our intent is clear. We will emerge from this process as a more financially secure and competitive airline, with a new financial structure, a rightsized fleet and improved customer offering,” said Schram.
Based on Norwegian’s current cash position and the projections going forward, the company believes it has sufficient liquidity to go through the above-mentioned process.
AerCap is reported to have recently cut its stake in Norwegian from 13.4%, which it acquired as part of an equity-for-debt swap, to 9% and it also still holds bonds in the company. In a recent earnings call, AerCap CFO, Pete Juhas, assured analysts that the company has an offsetting provision for the Norwegian shares and bonds on its balance sheet and so doesn’t expect any net negative impact going forward.